The biggest problem is the pesky hobby rule, often misunderstood by writers and CPAs alike. Some writers, even a lot of tax accountants, think the IRS hobby rule applies to writers. It doesn’t have to, if you’re serious about your writing.
To begin with, take a look at this IRS publication: http://www.irs.gov/irs/article/0,,id=186056,00.html
If you’re starting out as a full-time writer, you don’t have
to declare income 3 of the last 5 years if you satisfy some requirements.
The important points for you, as a beginning writer (not
making any money), from this article are:
- Does
the time and effort put into the activity indicate an intention to make a
profit?
- If there are losses, are
they due to circumstances beyond your control or did they occur in the
start-up phase of the business?
- Do you have the
knowledge needed to carry on the activity as a successful business?
- Do you expect to make a
profit in the future from the appreciation of assets used in the activity?
You
can report losses on a Schedule C for quite a few years before the IRS will
take a look at you. See this article, which elaborates on the above:
http://taxsolutionsforwriters.com/2014/02/16/a-special-provision-for-writers-in-the-tax-law/
This
link gives some checkpoints to make sure you’re fulfilling the requirements:
You
can see that it’s important to be keeping records of submissions, classes, time
spent, and to conduct writing as a business in every way you can. Also, of
course, keep track of what you can deduct.
This
article goes into exquisite detail: http://www.eclectics.com/articles/taxes.html
This
one includes some forms to help you keep track if you don’t already have some
that you like: http://www.artstaxinfo.com/writers.shtml
I
hope this helps. Don’t lose out on loss deductions that you’re entitled to. And
may you someday be declaring a profit! I did last year for the first time in 12
years. It was a small 3-figure profit, but maybe someday it’ll be more.
4 comments:
Thanks, Kaye! This year I'm determined to deduct all writing expenses. I have never done so in the past.
You're welcome! The trick, for me, is to keep track of them all year long. I have finally hit upon a method that sort of works. I throw all my receipts into a hanging folder. Then, at tax time, I take each one and file it in a folder under the type of deduction it is, also putting it on a spreadsheet. I always intend to do this monthly, but that never happens!
Good advice. I used to write notes on the form tha said, "I write 5 days a week at least 4 hours each day." I've never been audited and my expenses far outweigh my income, even now.
I talked to an IRS tax agent once and she said she got those notes from writers and loved getting them. It added something personal to all the forms, she said.
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